No More Credit Cards For College Students
When is it appropriate for a soon-to-be college student to get a credit card and start building his credit?
With the unexpected college expenses, the spring break trips and the fun dinners with friends outside the college cafeteria, you, as a parent of a soon to be college student, may be thinking that allowing your future grad a credit card may be a good idea.
The average college student will graduate with thousands of dollars in student loan debt, but should they also be accumulating credit card debt on top of their student loans?
Is there really a legislation out there that literally stopped college students from getting credit cards?
Well there has been some very much needed “restrictions” on giving credit cards to students. For young adults under the age of 21, they now have to show sufficient income before they can be approve for a credit card, unless they have someone to co-sign for them.
“The CARD Act” also banned gift giving to entice college students to sign up for credit cards.
No more free “frisbees, stress balls and T-shirts” to sign up for a credit card! Also, the “CARD Act” prevents card issuers from sending pre-approved offers to anyone under 21 years of age without the individual’s consent.
A 2013 survey by the Consumer Financial Protection Bureau showed that credit card agreements with college has decreased since 2009, the year the CARD Act was signed into law. Most of the provisions became effective in 2010.
Is using a credit card an alternative way to student loans to paying for college in part or in whole?
Experts DO NOT recommend using credit cards to pay for college AT ALL.
While it is fine to use a credit card to get “rewards”, make sure to use them carefully, and make sure you will be able to pay the balance in full by the due date, or you will accrue interest and the balance will take a really long time to be paid off. Having student loan debt may be a drag, but hey, at least it’s an investment in your future, and it will be worth it, if you’re smart! Credit card debt is considered “bad debt” while student loan debt is considered “good debt to have”.
It would be terribly stupid of you to graduate with a high student loan debt, and credit card debt as well. You don’t want to start your adult life drowning in loans and debt.
Co-Signers Beware
So What are the dangers for parents cosigning credit cards?
When a parent cosigns for either a student loan or for a credit card, they take full legal responsibility for the debt. So if the student racks up debt and can’t pay for it, the parent is responsible. The parent can also suffer damage to their credit score if the student uses the card irresponsibly.
Hopefully, parents have been talking to their kids about money management long before they leave for college. It’s very important to talk about credit cards, in particular, because they can be dangerous in the wrong hands. When young adults are out on their own, parents won’t be there when they get those offers. So it’s essential to arm your kids with information.
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